The Economist:

CALL it hyperactivity, call it the temptation to fiddle. Chief executives have a tendency to make acquisitions just to show they are doing something. Similarly, fund managers, sitting at their desks all day, have the urge to trade. Otherwise why go into the office at all?

But these trades inevitably incur costs, and not just in the form of fees disclosed to mutual-fund investors as part of a fund’s total expense ratio. When a large fund sells its stake in a small company, for example, the share price may fall significantly as supply overwhelms demand. A recent paper* in the Financial Analysts Journal (FAJ) found these hidden costs were, on average, higher than the funds’ declared expenses and had a significant negative impact on returns.

The academics looked at the record of 1,758 American equity mutual funds between 1995 and 2006. They estimated trading costs by looking at changes in portfolio holdings (which are revealed every quarter), checking the bid-ask spreads for the stocks concerned and making an allowance for the price impact of trades.

Dan McCrum:

The Berkshire Hathaway annual meeting is like Woodstock for capitalists. It draws tens of thousands of shareholders, value investors, groupies and the curious to the midwestern city Omaha, Nebraska.

They make the pilgrimage each spring to sit at the feet of Warren Buffett and Charlie Munger, the two men who have spent half a century building a sprawling $260bn conglomerate.

The FT’s Dan McCrum was there to capture the weekend festivities and the wise words from the pair of octogenarian sages.
3:53pm

I’ve landed in chilly Omaha, a big open city spread along the Nebraska side of the Missouri River, and its starting to fill up with eager investors from around the world. You can spot some of them carrying the 2013 annual report, required reading among the faithful, and by sound of discussion of the great man.

Matthew Goldstein:

Michael Marchillo, a plumber, has been trying and failing for months to buy a bigger home for his family here in Sin City. He was pre-qualified by a bank for a $130,000 mortgage, which a year ago would have landed a typical three-bedroom home in the area. No more. Now, the 36-year-old says, it’s hard to compete with “greedy investors” who come to the table flush with cash for quick deals.

Marchillo is on to something. The once-beleaguered Las Vegas housing market has been on fire since investment firms led by Blackstone Group LP, Colony Capital and American Homes 4 Rent began buying homes here some eight months ago, backed by $8 billion in investor cash to spend nationally.

These big investors and a handful of others have bought at least 55,000 single-family homes across the U.S. in the past year. In the Vegas area alone, they have accounted for at least 10 percent of the homes sold since January 2012, according to a Reuters analysis of housing transactions.

Tom Foremski:

Google’s dirty little secret is that its commercial algorithm is broken and it can’t distinguish between quality content and spam. Which is why it is backing big brands in a big way because that’s the easiest way to sort things out.

That’s too bad for small mom and pop businesses and the backbone of the economy.

Nicholas Retsinas @ HBR:

The United States housing market is no longer the boat anchor dragging down economic growth. Data from the S&P/Case-Shiller Home Price Indices show that average home prices in an assortment of American cities have been on the upswing, increasing by almost 7 percent across the country in 2012. Recent reports that sales of new single-family homes rose in March are proof points that “the housing market recovery remains on track.”

We asked Nicolas P. Retsinas to reflect on the re-emergence of the housing industry, what it means to the rental market, and the future of the mortgage interest tax deduction. Retsinas is a senior lecturer in real estate at Harvard Business School, director emeritus of Harvard University’s Joint Center for Housing Studies, and former Federal Housing Commissioner.

Q: What factors have been contributing to the housing recovery?

Steve Coll:

In the summer of 1960, Sidney Gottlieb, a C.I.A. chemist, flew to Congo with a carry-on bag containing vials of poison and a hypodermic syringe. It was an era of relative subtlety among C.I.A. assassins. The toxins were intended for the food, drink, or toothpaste of Patrice Lumumba, Congo’s Prime Minister, who, in the judgment of the Eisenhower Administration, had gone soft on Communism. Upon his arrival, as Tim Weiner recounts in his history of the C.I.A., Gottlieb handed his kit to Larry Devlin, the senior C.I.A. officer in Léopoldville. Devlin asked who had ordered the hit. “The President,” Gottlieb assured him. In later testimony, Devlin said that he felt ashamed of the command. He buried the poisons in a riverbank, but helped find an indirect way to eliminate Lumumba, by bankrolling and arming political enemies. The following January, Lumumba was executed by the Belgian military.

For Eisenhower, who had witnessed the carnage of the Normandy landings and the Battle of the Bulge, and later claimed to “hate war as only a soldier who has lived it can,” political assassinations represented an alluring alternative to conventional military action. Through the execution or overthrow of undesirable foreign leaders, the thinking went, it might be possible to orchestrate the global struggle against Communism from a distance, and avoid the misery—and the risks of nuclear war—that out-and-out combat would bring. Assassination was seen not only as precise and efficient but also as ultimately humane. Putting such theory into practice was the role of the C.I.A., and the agency’s tally of toppled leftists, nationalists, or otherwise unreliable leaders is well known, from Mohammad Mosadegh, of Iran, in 1953, and Jacobo Árbenz Guzmán, of Guatemala, in 1954, to Ngo Dinh Diem, of South Vietnam, in 1963, and Salvador Allende, of Chile, in 1973. Not all the schemes went according to plan; a few seemed inspired by Wile E. Coyote. The C.I.A. once planned to bump off Fidel Castro by passing him an exploding cigar.

Charles Pierce:

There is no clearer example of the uselessness and essential decadence of our courtier press than the annual White House Correspondents Association dinner, which will be fouling the reputation of the craft of journalism this very weekend. Putative journalists pretend they’re Academy Award nominees while squiring around actual Academy Award nominees, many of whom can’t tell one red carpet from another, and everybody acts as though there’s seemingly nothing wrong with journalism-as-celebrity, and with journalists claiming the same sort of celebrity as the people they cover. This is a medieval papal court for whom its Luther never was born. It’s Versailles without Robespierre.

Figure on paying big time for a semi-glamorous locale; an embassy will do (but only one for a major country). Then, add in food and booze – about $100 a head. Plus entertainment, security, cleanup, insurance. Valet parking for a few hundred could cost roughly $6,000. Want a celebrity at your event? Of course you do. First-class flight to Washington, a hotel suite and limo for the weekend: Count on $4,500 or so more per glamourpuss, not including his or her posse, which you may have to include.Add it up. When all is said and paid for after all the parties surrounding the White House Correspondents’ Association Dinner this weekend, some media organizations will drop as much as $200,000 each to entertain an elite list of guests.
These would be the same “media organizations” that are laying people off by the carload, slashing the benefits of those they don’t lay off, and making people do more work in less time for smaller salaries. But, that aside, the annual competition in the category of Best Performance By A Media Outlet In The Role Of A Corporate ‘Ho is likely to be spirited again this year, but The Atlantic’s David Bradley is making a strong run at it.

Jaron Lanier:

When copying is easy, there is almost no intrinsic scarcity, and therefore market value collapses. There’s an endless debate about whether file sharing is “stealing.” It’s an argument I’d like to avoid, since I don’t really care to have a moral position on a software function. Copying in the abstract is vapid and neutral.

It would be unfair to demand that people cease pirating files when those same people are not paid for their participation in very lucrative networks.
To get ahead of the argument a little, my position is that we eventually shouldn’t “pirate” files, but it’s premature to condemn people who do it today. It would be unfair to demand that people cease sharing / pirating files when those same people are not paid for their participation in very lucrative network schemes. Ordinary people are relentlessly spied on, and not compensated for information taken from them.

While I would like to see everyone eventually pay for music and the like, I would not ask for it until there’s reciprocity.

What matters most is whether we are contributing to a system that will be good for us all in the long term. If you never knew the music business as it was, the loss of what used to be a significant middle-class job pool might not seem important. I will demonstrate, however, that we should perceive an early warning for the rest of us.

Copying a musician’s music ruins economic dignity. It doesn’t necessarily deny the musician any form of income, but it does mean that the musician is restricted to a real-time economic life. That means one gets paid to perform, perhaps, but not paid for music one has recorded in the past.

George Will:

Two of the three most infamous Supreme Court decisions were erased by events. The Civil War and postwar constitutional amendments effectively overturned Dred Scott v. Sandford (1857), which held that blacks could never have rights that whites must respect. Plessy v. Ferguson (1896), which upheld legally enforced segregation, was undone by court decisions and legislation.

The third, Korematsu v. United States (1944), which affirmed the president’s wartime power to sweep Americans of disfavored racial groups into concentration camps, elicited a 1988 congressional apology. Now Peter Irons, founder of the Earl Warren Bill of Rights Project at the University of California at San Diego, is campaigning for a Supreme Court “repudiation” of the Korematsu decision and other Japanese internment rulings. Such repudiation, if it occurred, would be unprecedented.

An essay Irons is circulating among constitutional law professors whose support he seeks is timely reading in today’s context of anti-constitutional presidencies, particularly regarding war powers.

Frontline:

I’d like to cover some history, since you’ve covered some history yourself. You’ve seen a lot of things go by. Let’s just start with the mutual fund industry. Why do we have mutual funds in the first place? Who came up with the idea, and why?

… The first actual mutual fund, Mass[achusetts] Investors Trust, was started in 1924. What makes the industry go is the common sense behind it: I would say, number one, diversification — very underrated benefit; number two, efficiency; and number three, for those days, relatively low cost; and number four — I always put this last — management, because management cannot add value, but people somehow feel more comfortable with management looking over their investments.

In those days, by the way, the typical mutual fund was very much like an index fund. They were managed, but they tracked the market for years and years. …

… The first mutual funds were essentially index funds that allowed an investor that didn’t have a lot of money to buy into a fund and therefore diversify, because these were baskets of mini-stocks.

Right. And it was fairly efficient, and it was fairly long term, and it’s focused, the original mutual fund. So they weren’t doing all the trading like they’re doing today. They bought, basically, a basket of blue-chip stocks. …

It began also as a business of trusteeship. Many of the original mutual funds had nothing to do with the marketing of their shares. Firms were out there that sold mutual fund shares and made a commission on it, but they did the buying and selling. We didn’t even think about marketing.

You started a fund, middle-of-the-road fund. They all were in those days, in the late ’20s and early ’30s and into the ’40s and really up to the ’50s. And so they were run by trustees who felt a certain sense, I think, of fiduciary duty to their investors. Marketing was not in the middle of the picture. Marketing [was] peripheral, even if the manager controlled the marketer.